<PAGE>
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
[X] OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
[ ] OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ________
Commission file number 1-5666
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UNION TANK CAR COMPANY
(Exact name of registrant as specified in its charter)
Delaware 36-3104688
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
225 West Washington Street, Chicago, Illinois 60606
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(Address of principal executive offices)
Registrant's telephone number, including area code: (312) 372-9500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---------------- ----------------
There is no voting stock held by non-affiliates of the registrant. This report
is being filed by the registrant as a result of undertakings made pursuant to
Section 15(d) of the Securities Exchange Act of 1934.
Included in this filing are 10 pages, sequentially numbered in the bottom center
of each page.
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<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
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Part I. Financial Information
Item 1.
<S> <C>
Condensed consolidated statement of income -
three and nine month periods ended
September 30, 1997 and 1996 3
Condensed consolidated balance sheet -
September 30, 1997 and December 31, 1996 4
Condensed consolidated statement of cash flows -
nine months ended September 30, 1997 and 1996 5
Notes to condensed consolidated financial statements 6 - 7
Item 2.
Management's Discussion and Analysis
of Financial Condition and Results of Operations 8
Part II. Other Information
Item 1.
Legal Proceedings 9
Item 6.
Exhibits and Reports on Form 8-K 9
Signatures 10
</TABLE>
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------- --------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues
Services (leasing and other) $141,054 $131,382 $417,799 $392,397
Net sales 72,022 41,846 193,101 101,922
-------------- -------------- -------------- --------------
213,076 173,228 610,900 494,319
Other income 3,805 5,931 12,975 25,030
-------------- -------------- -------------- --------------
216,881 179,159 623,875 519,349
Costs and expenses
Cost of services 81,978 72,799 241,276 218,622
Cost of sales 63,269 34,764 168,942 81,573
General and administrative 13,612 13,775 42,241 40,591
Interest 18,140 17,911 56,585 54,589
-------------- -------------- -------------- --------------
176,999 139,249 509,044 395,375
-------------- -------------- -------------- --------------
Income before income taxes 39,882 39,910 114,831 123,974
Provision for income taxes
Current 10,953 14,612 34,504 40,170
Deferred 4,799 755 8,165 7,077
-------------- -------------- -------------- --------------
15,752 15,367 42,669 47,247
-------------- -------------- -------------- --------------
Net income $ 24,130 $ 24,543 $ 72,162 $ 76,727
============== ============== ============== ==============
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Assets
- ------
Cash and cash equivalents $ 104,334 $ 71,915
Accounts receivable, primarily due within one year 73,007 74,667
Inventories 80,650 65,756
Prepaid expenses and deferred charges 15,807 13,665
Advances to parent company,
principally at LIBOR plus 1% 86,758 111,169
Railcar lease fleet, net 1,558,014 1,459,800
Fixed assets, net 159,498 147,887
Investment in aircraft direct financing lease 36,714 37,347
Other assets 11,553 24,614
---------- ----------
Total assets $2,126,335 $2,006,820
========== ==========
Liabilities, Deferred Items and Stockholder's Equity
- ----------------------------------------------------
Accounts payable $ 18,512 $ 30,036
Accrued liabilities 178,401 180,865
Borrowed debt, including $67,414 due within
one year ($210,288 at December 31, 1996) 842,306 738,632
---------- ----------
1,039,219 949,533
Deferred income taxes and investment tax credits 501,204 493,537
Stockholder's equity
Common stock and additional capital 113,035 113,035
Retained earnings 472,877 450,715
---------- ----------
Total stockholder's equity 585,912 563,750
---------- ----------
Total liabilities, deferred items and
stockholder's equity $2,126,335 $2,006,820
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------
1997 1996
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 72,162 $ 76,727
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 83,785 80,190
Deferred taxes 8,165 7,077
Gain on disposition of railcars and other fixed assets (1,971) (13,363)
Other non-cash income and expenses 1,828 816
Changes in assets and liabilities:
Accounts receivable 103 (7,490)
Inventories (15,825) (1,962)
Prepaid expenses and deferred charges (2,171) (3,299)
Accounts payable and accrued expenses (12,767) 7,578
--------- ---------
Net cash provided by operating activities 133,309 146,274
Cash flows from investing activities:
Decrease in advance to parent 26,717 34,439
Construction and purchase of railcars and other fixed assets (198,731) (232,376)
Decrease in other assets 12,413 3,308
Proceeds from disposals of railcars and other fixed assets 4,898 22,011
Decrease in advances to affiliates - 12,828
--------- ---------
Net cash used in investing activities (154,703) (159,790)
Cash flows from financing activities:
Proceeds from issuance of borrowed debt 300,000 14,231
Proceeds from sale-leaseback transaction - 142,382
Principal payments of borrowed debt (195,611) (60,716)
Cash dividends (50,000) (53,000)
--------- ---------
Net cash provided by financing activities 54,389 42,897
Effect of exchange rates on cash and cash equivalents (576) 38
--------- ---------
Net increase in cash and cash equivalents 32,419 29,419
Cash and cash equivalents at beginning of year 71,915 28,781
--------- ---------
Cash and cash equivalents at end of period $ 104,334 $ 58,200
========= =========
Cash paid during the period for:
Interest (net of amount capitalized) $ 51,511 $ 47,650
Income taxes 39,141 39,000
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
UNION TANK CAR COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
(Unaudited)
1. UNION TANK CAR COMPANY (the "Company") is a wholly-owned subsidiary of
Marmon Industrial Corporation ("Marmon Industrial"). Marmon Industrial is a
wholly-owned subsidiary of Marmon Holdings, Inc. ("Marmon Holdings"),
substantially all of the stock of which is owned, directly or indirectly, by
trusts for the benefit of certain members of the Pritzker family. As used
herein, "Pritzker family" refers to the lineal descendants of Nicholas J.
Pritzker, deceased.
2. The accompanying unaudited condensed consolidated financial statements
include all adjustments, consisting of normal recurring accruals, which the
Company considers necessary for a fair presentation. These interim financial
statements do not include all disclosures normally provided in annual
financial statements. Accordingly, they should be read in conjunction with
the consolidated financial statements and notes thereto in the Company's
1996 Annual Report on Form 10-K/A.
The 1997 interim results presented herein are not necessarily indicative of
the results of operations for the full year 1997.
3. As more fully described in the Company's 1996 Annual Report on Form 10-K/A,
under an arrangement with Marmon Industrial, the Company is included in the
consolidated federal income tax return of Marmon Holdings. As a member of a
consolidated federal income tax group, the Company is contingently liable
for the federal income taxes of the other members of the group.
4. The Company and its subsidiaries have been named as defendants in a number
of lawsuits, and certain claims are pending. The Company has accrued what it
reasonably expects to pay in resolution of these matters and, in the opinion
of management, their ultimate resolution will not have a material effect on
the Company's consolidated financial position or results of operations.
5. Foreign currency translation adjustments and transaction gains and losses
are assumed by the Company's parent. For the nine months ended September 30,
1997 and 1996, Marmon Industrial absorbed losses of $108 and $56,
respectively.
6. The Company's Canadian subsidiaries periodically enter into foreign currency
forward contracts to hedge against U.S. dollar exposures. Foreign currency
forward contracts, all with initial maturities of less than one year,
amounted to $2,260 at September 30, 1997. No foreign currency forward
contracts were outstanding at December 31, 1996.
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<PAGE>
7. Summarized Financial Information of Procor Limited
Summarized consolidated financial information for the Company's wholly-owned
subsidiary, Procor Limited, in thousands of U.S. dollars, is as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Balance Sheet:
Railcar lease fleet, net $200,449 $213,644
All other assets 219,160 188,175
Borrowed debt 127,908 134,861
All other liabilities 167,353 153,872
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Statement of Income:
Services and net sales $28,534 $28,844 $79,288 $95,421
Gross profit 10,002 9,633 28,654 30,579
Net income 4,989 4,949 12,223 13,292
</TABLE>
8. Subsequent Event
In October 1997, the Company issued $30,000 and $20,000 in unsecured notes
due October 3, 2004 and 2007, respectively. The notes bear interest at the
rate of 6.63% and 6.75%, respectively, per annum, payable semi-annually on
March 1, and September 1, commencing on March 1, 1998. The notes are non-
redeemable and not subject to a sinking fund. Proceeds from the sale of the
notes are being used for general corporate purposes. These notes were issued
pursuant to a registration statement filed by the Company with the Securities
and Exchange Commission covering an aggregate of $400,000 of debt securities
and pass through certificates which may be issued from time to time.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
3rd Quarter 1997 versus 1996
- ----------------------------
Service revenues increased $9.7 million primarily due to the effect of railcars
added to the lease fleet.
Sales revenues increased $30.2 million primarily due to increased railcar sales.
Gross margin percentages decreased from the comparable period in 1996 primarily
due to increased railcar rental expenses from previous years' sale-leaseback
transactions and decreased gains on railcar disposals.
Other income decreased $2.1 million primarily due to the 1996 receipt of certain
fees in connection with the termination of an agreement pursuant to which a
subsidiary of the Company was to acquire Hawker Siddeley Canada Inc.
Nine Months 1997 versus 1996
- ----------------------------
Service revenues increased $25.4 million primarily due to the effect of railcars
added to the lease fleet.
Sales revenues increased $91.2 million primarily due to increased railcar sales.
Gross margin percentages decreased from the comparable period in 1996 primarily
due to increased railcar rental expenses from previous years' sale-leaseback
transactions and decreased gains on railcar disposals.
Other income decreased $12.1 million primarily due to the 1996 gain on sale of a
storage facility used in the liquefied petroleum gas storage operations and the
receipt of certain fees in connection with the termination of an agreement
pursuant to which a subsidiary of the Company was to acquire Hawker Siddeley
Canada Inc.
Financial Condition
- -------------------
1997 versus 1996
- ----------------
Operating activities provided $133.3 million of cash. These funds, along with
the issuance of borrowed debt and the collection of funds advanced to parent,
were used to provide financing for railcar additions, service borrowed debt
obligations and pay a dividend to the Company's stockholder.
Management expects future cash to be provided from operating activities, long-
term railcar financings and collection of funds previously advanced to parent
will be adequate to provide for the continued expansion of the Company's
business and enable it to meet its debt service obligations.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to "Business - Environmental Matters" in the
Company's Annual Report on Form 10-K/A for the year ended December 31,
1996 for a description of certain environmental matters.
Item 6. Exhibits and Reports on Form 8-K
b. No report on Form 8-K was filed during the quarter ended September 30,
1997.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNION TANK CAR COMPANY
REGISTRANT
Dated: October 30, 1997 /s/ R.C. Gluth
----------------------------------------
R.C. Gluth
Executive Vice President and Director
(principal financial officer and
principal accounting officer)
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the September 30, 1997 condensed consolidated balance sheet, condensed
consolidated statement of income for the nine months ended September 30, 1997,
and the notes thereto, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 104,334
<SECURITIES> 0
<RECEIVABLES> 77,479
<ALLOWANCES> 4,472
<INVENTORY> 80,650
<CURRENT-ASSETS> 0<F1>
<PP&E> 3,034,486
<DEPRECIATION> 1,316,974
<TOTAL-ASSETS> 2,126,335
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 842,306
0
0
<COMMON> 106,689
<OTHER-SE> 479,223
<TOTAL-LIABILITY-AND-EQUITY> 2,126,335
<SALES> 193,101
<TOTAL-REVENUES> 623,875<F2>
<CGS> 168,942
<TOTAL-COSTS> 410,218
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56,585
<INCOME-PRETAX> 114,831
<INCOME-TAX> 42,669
<INCOME-CONTINUING> 72,162
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,162
<EPS-PRIMARY> 0<F3>
<EPS-DILUTED> 0
<FN>
<F1> The Company issues financial statements utilizing a non-classified balance
sheet.
<F2> The Company's revenues are derived primarily from railcar leasing.
<F3> The Company is a wholly-owned subsidiary.
</FN>
</TABLE>
